Chart of the week: Corporate earnings expectations decline

The prospect of slowing global economic growth, among other macro concerns, caused considerable volatility across stock, bond and commodity markets throughout Q4 2018.

This week saw some evidence of these concerns coming to fruition as the World Bank lowered its global growth forecast for 2019, from 2.9% to 2.8%, and U.S. growth forecast for 2020, from 2.0% to 1.7%.1

The Q4 earnings season again reminds investors how significantly macro-economic trends can impact financial markets.

As the chart shows, Q4 2018 earnings growth expectations for S&P 500 companies are expected to average approximately 16%.2 While this would represent a still-healthy double-digit growth rate for the quarter, it would be a nearly 10% decline versus the prior three quarters.

As economic growth moderates and investors digest the potential for additional downside earnings guidance, investors may be well served preparing for a more muted return environment in the coming quarters, coupled with periods of heightened volatility.

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